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February 2018

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The Chinese government has procured 2.72 million tons of cotton under the state cotton reserve plan and together with previous inventory, total national cotton reserves are estimated to reach more than four million tons, resulting in great pressure on national warehouse capacity.

In order to ease pressure on cotton supply and stabilize cotton price, the state will substitute old cotton storage with new cotton. The state is expected to sell old cotton in May, June and July to ease pressure on storage capacity. Recently spot price has sharply risen; selling price of cotton in some areas has reached 12,600 Yuan per ton.

But if the state starts selling its huge stocks, there is every possibility that the prices could once again head southwards, in the process defeating the very purpose of stabilizing the cotton markets.